'File 8/2 II Gold Smuggling' [‎47r] (93/120)

(N 9152/1111/G)
COPY
CIRCULAR NO.0128
TOP SECRET .
Copy No.68
FOREIGN OFFICE,
31st October, 1949.
Soviet Gold Dealings.
Sir,
My attention has been drawn to the considerable evidence
that has accumulated during recent months of increased sales
of Russian gold on international markets, particularly in
Switzerland and Tangier. There is also evidence that the
Bulgarian Government, acting no doubt for the Soviet Govern
ment, have been offering gold for sale.
2. According to the limited evidence available, the first
step taken in making gold available for use in non-Communist
countries is its transfer to a bank in, for example, Switzer
land. (This is perhaps the point at which gold movements
may be most easily detected; £1,000,000 worth of gold weighs
about 2i tons, and the physical transfer of such quantities
naturally calls for special arrangements). The gold, once
deposited in a bank abroad, is then exchanged into foreigh
currency. This may be carried out by various means. Gold
mav be sold openly or disposed of locally through inter
mediaries, gold dealers or on the Black Market. Such evidence
as I have suggests that the latter methods are usually em
ployed, presumably in order to maintain a greater degree of
secrecy and also, incidentally, to take advantage of the higher
prices obtainable on the Blank Market. There is also evidence
that Russian gold is being used for the manufacture of counter
feit gold coins of various denominations. As soon as funds
are standing to the credit of the Russians, or their agents,
in foreign currencies, e.g. dollars-, transfers can be made
to any part of the world through normal banking channels.
Here again, intermediaries are frequently employed, presumably
for greater secrecy.
3. It is possible that a certain proportion of such sales
is being devoted to legitimate commercial purposes, but the
evidence I have suggests that most of the proceeds are being
devoted to subversive ends, such as the financing of Communist
and fellow-travelling propaganda, especially in Central and
Southern America, the Near East and South-East Asia. In par
ticular, there are known to have been shipments of gold or
transfers of the proceeds in other currencies to New York,
Guatemala, Honduras, Beirut, Saigon and Macao. It seems
possible also that the Russians are expending considerable
sums on the organisation of Communist propaganda in Western
Europe. The present intensification of the Communist effort
on the Labour Front, for instance under the aegis of the
W.F.T.U. and its Trade Departments, makes it seem likely
that there has been in increase in expenditure on agitation,
strike pay, etc.
4. It is therefore important that you should report any
information which may be available on the following subjects•-
(a) Movement of gold from Communist to non-Communist
areas;
(b) Exchange of gold of suspected Russian origin into
local currencies, or manufacture of counterfeit
gold coins from Russian gold;
Ac)